Obamacare: America's Last Entitlement

Thirty-one and a half months after the Affordable Care Act was signed into law by President Obama, we finally have our answer. The President’s re-election, and the Democrats’ gains in the Senate, mean that Obamacare is here to stay. The conservative movement to repeal the law has been defeated. But we know something else: that America’s unsustainable fiscal situation means that Obamacare is destined to be the last major entitlement enacted by the United States. Indeed, Obamacare’s victory sets off a stiff competition for taxpayer dollars between Obamacare, Medicaid, and Medicare. It’s a battle that the elderly, in particular, are likely to lose.

According to the Congressional Budget Office, there is only one category of federal spending that is increasing as a share of the economy: health care. Today, government spending on health care is dominated by two programs: Medicare, for the elderly, and Medicaid, for the poor. In 2012, federal and state governments will spend $1 trillion on these two programs, a figure that will nearly double over the next eight years.

Today, new spending on Obamacare-related programs—primarily the expansion of Medicaid and the new subsidized insurance exchanges—is negligible. By 2017, the federal government will be spending an addition $206 billion a year on Obamacare programs, on top of the $1.1 trillion it spends elsewhere. And these figures don’t count the hundreds of billions of dollars that state and local governments spend on health care, Medicaid in particular.

It’s likely that Obamacare’s subsidized insurance exchanges grow at a faster rate than the CBO currently projects. For one thing, tens of millions of employed individuals are likely to lose employer-sponsored coverage, and instead seek coverage on the exchanges. For another, state governments are likely to maximize the number of residents that they place on the federally-subsidized exchanges, so as to minimize the number of residents that are in partly-state-funded Medicaid.

The government expects that there will be approximately 62 million Americans on Medicare by 2020. The CBO assumes that 25 million Americans will enroll in the exchanges that year. But the CBO assumes minimal employer dumping, and no state-based arbitrage between Medicaid and the exchanges. If, say, 20 million workers are dumped into the exchanges, and 5 million Medicaid enrollees are transferred to them, exchanges could have 50 million enrollees in 2020.

If that were to happen, America would be faced with a titanic battle between two large, subsidized constituencies: those on the Obamacare exchanges, and those on Medicare. While elderly voters are famously active at the ballot box, it’s those on the exchanges who would have much more money at stake. After all, the average retiree is on Medicare for about 14 years; a low-income high-school graduate could stay on Obamacare for 47 years.

Politicians will fear younger voters more than older ones

Who will win that fight? If history is any guide, the Obamacare beneficiaries will win, because they will have more money at stake, and comparable numbers to seniors’ at election time. Obamacare will destroy the old individual insurance market, leaving the uninsured with no recourse other than the subsidized exchanges. Simple Medicare reforms, such as raising the retirement age, will be used to fund the growing number of people on the exchanges.

If Obamacare’s exchanges do end up conquering Medicare, there will be no shortage of ironies. The Obamacare exchanges use a means-tested premium-support system that is to the right of the one proposed by Mitt Romney, Paul Ryan, and Ron Wyden for Medicare. Obamacare’s premium-support payments grow at a specified rate, one that may not keep up with health-care inflation: the precise criticism that Democrats leveled against Paul Ryan’s old Medicare plan. And similarly, it might be Obamacare—the bane of Republicans’ existence—that ends up replacing Medicare with a system much like the one favored by…these very same Republicans.

Or, we could just keep spending infinite amounts of money on both programs until we go bust.

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It would be better for all of us, if we all stopped using inflammatory rhetoric, like “entitlements”,and instead work together to find solutions. Continuing to try and appeal to base emotions, makes you part of the problem, not part of the solution. That’s a shame, since you are a smart guy, who would be more helpful to us all, if you could somehow, convince yourself to use your abilities in a more positive way. This election should have, at least, taught you that the majority of folks are looking for solutions. We already know what the problems are, thank you very much. Either lead, follow, or get the hell out of the way.

I ask because of your own provocative use of inflammatory rhetoric, words like “problem,” “shame,” “solutions,” “hell,” not to mention “a”, “an”, and “the”

Seems to me that trying to stifle people’s opinions – or what is the same thing, insisting that others censor what they have to say according to your rules, or that others use only the vocabulary that suits you – is deeply undemocratic. Eric Arthur Blair famously pointed this out in the last century . . . don’t you know?

Judge Crater – Ok. Please show me where I suggest stifling discussion? It’s the same old story, I guess. I’m looking for positive constructive discussion, not partisan bull. And that’s from either side. I collect Social Security and I’m in Medicare. It’s not an entitlement, they are insurance policies, I paid for, and am now collecting. Entitlement? HORSE FEATHERS! (Does that make you feel better?) Avik. You don’t need a surrogate,right?

Insurance policies consist of actuarially determined payments based on risk of a particular event occurring. Neither Social Security nor Medicare fall within this definition.

Social Security is not an insurance policy. It’s a taxpayer-funded pension. Regardless of whether you pay into it and regardless of how much you pay into it, you get the same amount as anybody else.

Medicare is not insurance in the full sense of the term either. Once again, you get Medicare as a matter of fact when you grow old or become disabled. Benefits don’t depend on how much you’ve contributed from your payroll taxes over the course of your lifetime. Yes you can pay for supplemental coverage and prescription drug coverage. Those two are indeed forms of insurance policies.

By definition, both are forms of entitlement. It is something you are entitled to as a matter of fact by being a U.S. citizen. Just because the word entitlement sounds nasty doesn’t make it any less true.

If you’re looking for constructive discussion, then you should accept the fact that stemming the growth of entitlement spending is the only option going forward, as all major projections (as Avik aptly points out) show entitlements crowding out other spending in the coming years.

Jan:

Voters have not made anything “clear”. The popular vote was much closer than the electoral votes, and in states like Florida it was right down the middle. Obama has not secured a “mandate” presidency and there is tremendous opposition to the ACA and other legislation that came out of the administration.

Your comment about the private sector not working is uninformed at best — the private sector hasn’t been allowed to work.

When you have a chance, have a look at what state in the union has the highest insurance premiums.

Meanwhile, the term “ partisan bull” is clearly how you define discussion from anyone who does not agree with you. Do you honestly believe that’s the way to elicit positive constructive discussion? fwiw you seem to believe your use of the term “partisan bull” is not “inflammatory”.

“I collect Social Security and I’m in Medicare. It’s not an entitlement, they are insurance policies, I paid for”

Really? Fact is, you “paid for” only a small part of the benefit you are receiving. If instead participants paid for their benefits, the so-called SS and Medicare Trust Funds would not presently have unfunded liabilities of more than $60 trillion. Bottom line is, general tax revenue, not you, is paying for, and guarantees, the majority of benefits you receive. Your benefits are therefore government entitlements, plain and simple. I can understand you don’t wish to accept that as fact; nevertheless it’s true.

“HORSE FEATHERS!

No need to raise your voice – or your upper-case. Besides, attempting to shout others down is not a particularly imaginative way to stifle discussion.

Where do you guys come up with this stuff? Social security benefits the same for everyone regardless of how much a person contributes? I don’t know what universe you live in, but the one I live in it certainly is not.

Also let’s completely take Social Security off the table here. Social Security is completely solvent until something like 2030, and then after that with minor adjustments it can be solvent indefinitely.

Medicare is a problem, but the government has complete control to reform Medicare if it wants, it’s just a matter of the want.

Brian, you state: “Social Security is completely solvent until something like 2030″

Yes – precisely because government “pays for”, and guarantees the benefits. As you well know, participants’ cumulative contributions come nowhere near funding future benefits. In other words, SS is a government entitlement.

Same is true of Medicare.

As you correctly point out, reform of Medicare is dependent on government’s willingness to reform it. SS reform is dependent on government the same way.

So your observation further underscores the nature of these programs – they are entitlements controlled by the government and paid from general tax revenues.

Judge, I would suggest you look up a little more information about these program before you critcize them. Social Security is completely paid for by the social security payroll tax employees pay, and employers pay. It is based on your 35 highest earning years. If you don’t work for at least 35 years, you pay a heavy price as to what you get in return. Also, most people don’t collect 35 years worth of benefits so although you are right in that what you and and your employer contribute is not exactly what you collect per year, when you factor in that you are contributing for many more years than you collect, the net result is close. And that’s without even factoring all who contribute and never collect at all.

Second, you can call it an entitlement if you want, I could care less. Your fundamental assumption that entitlements are the problem with this country is flawed. We need entitlements. They constantly need reform, but we need to keep them. Let’s forget that every other 1st world country in the world has entitlements as well, but just consider that these programs developed because of a significant need. They didn’t arise out of the blue because democrats wanted to hand out free money. In fact it’s just the opposite. Liberals in this country had very similar economic views to what conervatives have today 100 years ago, but those views changed over the last 100 years when people realized that a free market economy alone, without intervention and without entitlements was not working.

-Last I checked, we have a majority wins electoral process here. If people were terrified of Obamacare they would have voted against Obama and the law’s Dem supporters. More people voted to return Obama to office—the popular vote was no contest. Younger people, who will be impacted to a much higher degree by the law than seniors, voted overwhelmingly for Obama and to put more Democrats in Congress.

-Massachusetts had the nation’s highest health insurance premiums before they implemented health care reform. That has everything to do with the state having a disproportionate number of teaching hospitals and world class health care institutions and little to do with universal coverage. Massachusetts explicitly did not address cost control in its reform law. They made a decision to expand coverage first. More recently, they passed cost control legislation that mirrors some of what is in Obamacare. Please see this other Forbes article on Romneycare and the Massachusetts experience: http://www.forbes.com/sites/kenrapoza/2012/01/20/romney-care-massachusetts-healthcare-reform/

you are an idiot…the people who re-elected obama are lazy ignorant freeloaders whose very existence depends on the government…they can not even imagine what working is all about much less “working together” that is such idiotic rhetoric….please…keep your head in the sand and i hope you suffocate as the president is suffocating this country!